Trend following still works

Chuck Krug

Chuck Krug

The Enhanced Risk (USD) subset of Transtrend’s Diversified Trend Program
Aggregate Nominal Account Size (including notional funds): approx. USD 4,966 mln.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cum.
20154.10%...........4.10%
2014( 3.25%)1.04%0.63%1.50%3.33%0.96%( 1.41%)4.08%3.48%( 2.06%)6.91%1.44%17.46%
20130.17%( 1.32%)2.18%2.90%( 4.58%)( 0.54%)0.44%( 2.53%)( 1.18%)1.31%0.87%1.92%( 0.60%)
20121.09%2.31%( 0.89%)0.55%7.53%( 5.27%)4.04%( 1.41%)( 3.07%)( 3.65%)( 0.34%)0.50%0.72%
2011( 0.77%)1.77%( 2.14%)2.85%( 4.46%)( 2.59%)1.89%( 3.20%)( 2.00%)( 2.11%)0.48%1.58%( 8.64%)
2010( 3.90%)1.18%8.18%1.82%( 4.58%)( 0.22%)( 0.86%)2.75%3.59%3.91%( 0.82%)3.60%14.88%
2009( 0.27%)0.76%( 3.34%)0.18%1.28%( 1.10%)( 2.30%)0.23%( 0.93%)( 3.48%)2.11%( 4.79%)( 11.28%)
2008( 0.48%)5.55%1.33%0.59%3.28%3.03%( 2.38%)( 1.38%)4.95%7.12%2.57%2.29%29.38%
20071.64%( 4.07%)( 3.24%)5.69%6.84%3.65%( 2.50%)( 2.44%)7.81%9.02%( 2.16%)1.32%22.39%
20061.78%( 2.26%)0.89%1.94%( 3.78%)( 1.26%)( 3.69%)4.72%0.12%4.56%3.68%5.29%12.03%
2005( 4.35%)2.74%2.03%( 3.48%)1.03%4.02%3.26%( 0.49%)1.80%( 0.67%)3.40%( 3.00%)5.98%
20042.08%4.95%( 2.18%)( 3.17%)( 0.31%)( 2.35%)( 1.34%)( 0.42%)1.63%3.20%8.97%1.71%12.82%
20035.18%4.03%( 5.04%)3.77%5.81%( 2.45%)( 2.36%)( 0.09%)( 2.04%)2.48%( 0.69%)0.22%8.49%
2002( 1.17%)( 0.69%)2.00%( 0.99%)2.34%8.41%5.97%2.78%3.44%( 2.72%)( 1.71%)6.58%26.24%
20010.72%0.60%6.75%( 1.48%)1.29%( 1.36%)4.72%2.37%7.82%1.07%( 3.12%)4.86%26.36%
20001.55%( 1.99%)( 2.29%)0.14%2.52%( 2.44%)( 0.77%)1.81%0.62%2.54%5.97%4.47%12.39%
1999( 3.86%)1.22%( 2.77%)3.11%( 3.10%)4.51%1.95%( 2.51%)0.63%( 6.82%)1.84%4.29%( 2.21%)
19980.25%0.21%2.79%( 5.43%)3.55%1.36%( 4.75%)19.57%1.93%0.86%( 1.06%)2.70%21.94%
19979.64%5.12%( 2.17%)( 4.07%)( 0.62%)0.20%19.27%1.02%1.87%( 8.58%)5.72%7.95%37.92%
19965.38%( 6.65%)( 0.48%)8.59%( 4.40%)( 0.30%)3.88%7.26%7.51%10.37%1.46%( 3.12%)31.68%
1995( 6.16%)9.57%10.15%2.16%6.49%3.63%( 3.70%)( 0.58%)1.75%( 3.81%)2.07%5.70%29.10%
 
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For trading methods like trend following the results are statistically dispersed.

When the results streak below the mean for an extended period, like all statistically dispersed results eventually do, then people who dont get this concept think the method no longer works.

Very few people have the patience to ride out a multi year period of below average returns but these are perfectly normal for the method.

Its all made worse by the fact that trading results have fat tails on both sides of the distribution, longer losing periods than would normally be expected + larger winners too.
 
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2014 was definitely a good year for trend followers of all stripes. Even most of the Turtles pulled out of their doldrums with double digit gains. Still, most people seem to dislike the approach because they don't realize the realities of trading. They think they can do better, but few really do over the long run.
 
Sergio77 said:
Under performance of S&P 500 in 2014, negative performance in 2013, 2011, dismal in 2012.

http://www.managedfutures.com/program_performance.aspx?fundtype=&productId=18883

Get real guys. Get your act together for your own benefit only. Trend-following no longer works the way it did in the 90s.
More...

Dunn Capital was up 34% in 2013 and 35% in 2014. Mulvaney Capital was up 43% in 2013 and 67% in 2014. These are both long term trend followers.

The markets are clearly different compared to the 1980's and 1990's, but trend following still works. Just like any trader, the trend follower has to adapt. Deflationary conditions over the last six years have resulted in easy money, which has translated into big trends in financial assets, but few big trends in commodities and currencies, where the managed futures space has remained concentrated.

Unfortunately, many CTAs are a bit stubborn when it comes to change.
 
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